Charles Abad Santos Bonilla of Boca Raton Florida a stockbroker formerly registered with David Lerner Associates Inc. has been fined $5,000.00 and suspended for five months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity supported by findings that Bonilla made unsuitable recommendations to customers concerning alternative investments. Letter of Acceptance Waiver and Consent No. 2020067626001 (Feb. 8, 2021).
According to the AWC, from December of 2015 to December of 2017, mutual fund recommendations were made to David Lerner customers by Bonilla. The objective of one of those recommended mutual funds was to provide current income and long-term capital appreciation. Eighty percent of the net assets of that mutual fund had been directed to assets or securities of companies in the energy sector. The mutual fund’s goal was to distribute payments to customers on a monthly basis.
Three customers were advised by Bonilla to collectively invest at least $250,000.00 in the energy-sector mutual fund. Bonilla generated commissions when customers acted on his recommendations. Between July of 2014 and December of 2015, that fund lost 40 percent of its net asset value.
FINRA indicated that there was no adequate due diligence undertaken by Bonilla prior to him positioning the mutual funds for David Lerner customers. The fund was minimally explained to them by the stockbroker, and he was not aware of how distributions would be made from the fund. The AWC indicated that basic features of the fund were beyond Bonilla’s comprehension.
FINRA also found that unsuitable limited partnership interests were recommended by Bonilla. The regulator indicated that from December of 2015 to January of 2017, customers were advised by the stockbroker to buy illiquid units of a limited partnership that was established for buying and developing United States-based oil and gas properties.
FINRA mentioned that when the investment was initially offered, there was no indication of which properties were to be purchased by the partnership. Distributions were supposed to be provided through a return of investor capital or through the partnership’s offering proceeds and operations. The AWC also indicated that the limited partnership would liquidate proceeds within seven years. At that time, the partnership expected to either list its units on a national securities exchange, distribute proceeds to partners, or merge with another company. Profitability of the partnership was largely dependent on how those underlying properties performed.
Investors were advised by Bonilla to buy $650,000.00 worth of partnership units. Their purchases produced $18,061.31 in commissions for the stockbroker. Investors were later informed that partnership distributions would be suspended.
FINRA confirmed that there was no reasonable diligence undertaken by Bonilla before he asked investors to buy the partnership units. The stockbroker was unaware of how investors would receive distributions. He did not understand how the units were calculated. The AWC stated that Bonilla failed to understand basic risks and features of the alternative investment.
FINRA determined that Bonilla provided unsuitable recommendations to investors in violation of FINRA Rules 2010 and 2111.
Bonilla’s registration with David Lerner Associates has been terminated as of May 1, 2018. He was registered with Pruco Securities LLC between May 8, 2018 and February 25, 2019.